When deductions on a return look a bit suspicious, an audit may be unavoidable. In addition to seeing a tax rate go up, a civil penalty (fine) may be levied if the agency deems the error to be egregious. In some cases, the deductions are so inappropriate, the IRS might suspect fraud and initiate a criminal investigation. To avoid any legal problems, taxpayers are advised to make sure any business-related clothing deductions are 100% legitimate.
A Bad Situation
Former reality television star Michael "The Situation" Sorrentino is currently in a lot of trouble with the Internal Revenue Service. Sorrentino is facing criminal charges in federal court for tax fraud based, among other things, on claiming clothing and other items were used for business purposes when they were actually for personal use. When the government feels you have been misleading on a tax return, the accusation of fraud may rear its head.
Sorrentino's case led to criminal charges being filed because it entailed several years worth of tax returns and several millions of dollars. The average person who owes far less in taxes may be looking at "just" a fine, but there is no reason to get into trouble in the first place.
The Rules Defined
The rules for deducting clothing are very clear. The deduction only comes into play when the clothes are required as a "condition of employment" and are not "suitable for everyday wear." Anything that falls outside of those criteria would be improper deductions.
So, if you work at a gym and are required to purchase a uniform with the gym's name and logo on it, this would be a deductible expense. However, purchasing designer sports apparel would not be deductible even if the clothing was only worn at the gym during working hours.
Correcting a Return
People do make mistakes on tax returns due to misunderstanding rules, laws, and regulations. Those who accidentally took clothing (or other) deductions they should not have are advised to seek out an accountant, file an amended return, and pay the proper amount of tax. Coming forward and making a correction is a better plan than hoping the IRS never notices and never audits.
Hire a Professional Preparer
Be mindful that any return that is audited or is assessed to be a civil penalty may end up being referred to the criminal investigation division. Hiring a professional accountant to prepare a return drastically cuts down on the chances of taking a false deduction. As a result, a host of legal tax woes may be averted.